Chesapeake Energy 2013 Annual Report Download - page 135

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
127
The table below presents summarized financial information for our significant equity method investments, including
FTS and Sundrop. The investee financial information reflects the most current financial information available to investors
and includes lags in financial reporting of up to one quarter.
Years Ended December 31,
2013 2012 2011
($ in millions)
Current assets ............................................................................................... $ 521 $ 892 $ 732
Noncurrent assets ......................................................................................... $ 1,859 $ 4,225 $ 5,175
Current liabilities ............................................................................................ $ 192 $ 207 $ 277
Noncurrent liabilities ...................................................................................... $ 1,468 $ 1,726 $ 1,916
Gross revenue ............................................................................................... $ 1,807 $ 2,190 $ 2,209
Operating expense ........................................................................................ $ 3,926 $ 3,089 $ 1,630
Net income (loss) ........................................................................................... $ (2,459) $ (968) $ 494
14. Variable Interest Entities
We consolidate the activities of VIEs for which we are the primary beneficiary. In order to determine whether we
own a variable interest in a VIE, we perform qualitative analysis of the entity’s design, organizational structure, primary
decision makers and relevant agreements.
Consolidated VIE
Chesapeake Granite Wash Trust. For a discussion of the formation, operations and presentation of the Trust,
please see Noncontrolling Interests in Note 8. The Trust is considered a VIE due to the lack of voting or similar decision-
making rights by its equity holders regarding activities that have a significant effect on the economic success of the
Trust. Our ownership in the Trust and our obligations under the development agreement and related drilling support
lien constitute variable interests. We have determined that we are the primary beneficiary of the Trust because (i) we
have the power to direct the activities that most significantly impact the economic performance of the Trust via our
obligations to perform under the development agreement, and (ii) as a result of the subordination and incentive
thresholds applicable to the subordinated units we hold in the Trust, we have the obligation to absorb losses and the
right to receive residual returns that could potentially be significant to the Trust. As a result, we consolidate the Trust
in our financial statements, and the common units of the Trust owned by third parties are reflected as a noncontrolling
interest.
The Trust is a consolidated entity whose legal existence is separate from Chesapeake and our other consolidated
subsidiaries, and the Trust is not a guarantor of any of Chesapeake’s debt. The creditors or beneficial holders of the
Trust have no recourse to the general credit of Chesapeake; however, we have certain obligations to the Trust through
the development agreement that are secured by a drilling support lien on our retained interest in the development wells
up to a specified maximum amount recoverable by the Trust, which could result in the Trust acquiring all or a portion
of our retained interest in the undeveloped portion of an area of mutual interest, if we do not meet our drilling commitment.
In consolidation, as of December 31, 2013, approximately $320 million of net natural gas and oil properties, $22 million
of other current liabilities, $1 million of cash and cash equivalents and $5 million of short-term derivative liabilities were
attributable to the Trust. We have presented parenthetically on the face of the consolidated balance sheets the assets
of the Trust that can be used only to settle obligations of the Trust and the liabilities of the Trust for which creditors do
not have recourse to the general credit of Chesapeake.